Guide: Verification Process for Mortgage Originations

If you’re a mortgage professional (loan officer, underwriter or IT manager): you’ll learn how to evaluate the effectiveness of your current verification methods. You’ll also read about the automated verification technology we offer, including our verification waterfall product.
If you’re a consumer: you’ll learn what to expect after applying for a mortgage, especially during the verification of your income, assets and employment. You’ll also learn why accurate verifications help ensure you end up with the best possible mortgage - one with lasting affordability built-in.

When we began to write this article, we decided to provide information to our most frequent site visitors, current and future clients, and consumers who visit our site to learn verification basics. It’s why we’re beginning with some important financial events that helped create today’s lending environment.

1970: The Fair Credit Reporting Act, or FCRA, was signed into law. It regulates how credit reporting agencies collect consumer data and how they share that data. Do you want to learn who enforces the FCRA, how it protects consumers and why non-compliance is a terrible idea for lenders? Check out our FCRA article “What Is the FCRA and How Does it Protect Consumers?”

1975: The Home Mortgage Disclosure Act (HMDA) was passed. This Act required lenders to keep records of their lending practices and submit them for annual federal review.

2010: Two members of Congress - House Financial Services Chairman Barney Frank and Senate Banking Chairman Christopher J. Dodd - helped create the Dodd-Frank Wall Street and Consumer Protection Act.

Staying current and compliant can be difficult. To learn more about how Informative Research can help, read “The Challenge of Compliance vs. Cost.”

Today, many federal lending regulations are a result of the Dodd-Frank legislation. (It’s a long title, so many refer to it as “Dodd-Frank.”) One regulation requires lenders to verify every applicant’s ability to repay a mortgage. This is the verification process you’ll learn about here, and you may follow links to additional articles that dive deeper.

When prospective borrowers complete a mortgage loan application, they’re asked to provide details of current and previous jobs and salaries.

Self-employed applicants are required to provide personal and business income tax returns, together with business license documentation.

The above sections of the loan application require applicants to provide details of their monthly income, current housing expenses, financial assets and liabilities.

Next, the mortgage lender will begin the verification process to ensure that the information the consumer provides is accurate. This may be completed in-house or through third-party technology. Follow this link to “Problems (and Solutions) – Verifying Employment and Income” to learn more.

Today’s workforce has evolved far beyond the 9 to 5 paradigm, meaning lenders are now encountering more contractors and self-employed workers.

As more workers pursue non-salaried careers, a few are tempted to inflate their income to boost their chances of qualifying. Other applicants who report artificially high incomes might be potential homebuyers desperate to win a bidding war or those tired of watching home prices rise just out of their reach.

When confronted, lenders have discovered that these applicants rarely considered their actions fraud. Instead, it was wishful thinking - their way of coping with an often-ruthless, unpredictable market, as this graph illustrates.

Informative Research has created products that deliver accurate employment and income details for every borrower. While the intended purpose is to help lenders spot inaccurate income data, these products will also control lender costs while freeing up skilled staff’s time for other duties.

To learn more, follow this link to read “How Verification of Employment (VOE) Works for Today’s Mortgage Lenders.”

Other transactions, such as rental agreements, line of credit offers and even employment offers, benefit from an accurate Verification of Employment (VOE). If a potential lender, landlord or employer bypasses this critical step, it could come back to bite them. They risk financial loss through loan default, fraud or non-payment.

While there are several options for performing a VOE, technology now provides options that deliver higher levels of protection and accuracy. Our blog article “Asset, Employment and Income Verification Basics for Lenders, Landlords and Businesses” offers more details about these verification methods, including our latest technology.

Verifying a borrower’s assets through a Verification of Assets (VOA) is just as important as the VOE. Not only is it required to create a Qualified Mortgage as defined by Dodd-Frank legislation, but it’s also crucial for mitigating risk. With that said, a manual VOA process can be time-consuming for lenders and borrowers alike, and there’s the possibility of human error by an overworked processor.

More savvy lenders are closing affordable, qualified mortgages by streamlining the process by which a lender can securely verify data directly with the borrower’s bank. Read more about these systems in our blog article “Verification of Assets (VOA) and Why It Matters.”

By subscribing to our Verification Waterfall solution, lenders can save money and time while earning borrower loyalty. This technology solves the #1 problem a manual verification staff faces: finding the best verification source for individual borrowers.

A single manual verification search can waste hours of a lender’s support staff time. Our verification waterfall automates the process by moving each request from source to source until the correct verification is located.

Here’s how the Waterfall works:

Lenders select from a list of connected, preferred verification partners to preconfigure a waterfall that best meets the lender’s strategic goals.
When it comes time to retrieve a verification, the lender’s system or user will send the order information to the verification waterfall platform.
The lender’s unique waterfall automatically cycles through each verification provider until a borrower’s employment data is found.

Lenders interested in getting their feet wet can learn more here: What is our Verification Waterfall?

Over the past decades, the mortgage lending industry has seen unprecedented challenges. In addition to the highly competitive, unpredictable nature of the residential real estate market, continued changes in federal legislation have required lenders to constantly review their underwriting processes to ensure 100% compliance.

As a result of these changes, mortgage lenders are currently faced with a verification process that has become complex and costly. Working with a dedicated, technology-forward verifications partner helps lenders control costs while empowering staff to dedicate time and skills to improve customer experiences and faster closings. Outsourcing your verifications can provide many benefits for a lender. To learn more about the main benefits, read the “Six Reasons to Hire a Verification of Employment Partner.”

Informative Research is a technology platform company focused on delivering data solutions for the lending community– the Verification Waterfall is just one of our many platform components. Click here to learn more about the newest data solutions from Informative Research.

Your Complete Guide: The Asset, Employment and Income Verification Process for Mortgage Originations

Accurate Verifications of Borrower Income, Employment and Assets are Essential to the Mortgage Process.

A Short History of the Verification Process

Just The Facts: Verification Basics

The Gig Economy and Employment Verifications

Other Reasons to Verify Employment and Income

Verifying Assets: “Can You Afford It?”

Introducing Our Verification Waterfall

More Reasons to Work with Informative Research

Conclusion

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